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Who Pays? Generation Rent's Time-Bomb

31/12/2015 17:01 GMT | Updated 30/12/2016 10:12 GMT

My introduction to the UK labour market was rough. Graduating in the summer of 1990 - the start of a recession - I had first-hand experience of long-term unemployment.

Needless to say, my main priority in the years since was financial security. Frightened off by the early '90s private pensions mis-selling scandal, my focus turned to bricks and mortar. I may have been a later starter on the career front, but buying a home was still within my reach. To make this happen took thrift and tight budgeting, habits which have died hard. I wouldn't even consider shop-bought sandwiches, and to this day get pangs of guilt buying anything that could be described as non-essential. There were obvious drawbacks to this approach, but it stood me in good stead.

Contrast this with graduates coming onto the job market today. They're less likely to have to face that terrible experience of unemployment, with the meaningless and humiliating Job Centre hoops to jump through. But there are other hoops, such as internships, being paid virtually nothing for sophisticated work. And the prize of paid employment comes with a hefty price tag - graduates can expect to leave university £44,000 in debt.

No wonder priorities are different. Young people shudder at the unattainable deposits needed for a mortgage. According to the Office of National Statistics, Londoners can expect to pay at least 40.4 per cent (Bexley) and up to 78.3 per cent (Westminster) of their salary on rent. A young professional whose salary goes towards paying rent and paying off a long-term student loan lives for today.

Well-rehearsed arguments about young people delaying starting a family, or unable to put down roots in a particular locality, do go some distance in appreciating the difficulties faced. But they miss the bigger picture. Those types of decisions and sacrifices were ones that we had to make too, 20 years ago. What's new for today's renters however, is that there's little prospect of getting onto the housing ladder and no guarantee of a reasonable income in retirement either. Generation Rent will stay just that.

There's a growing acceptance of rent as the 1980s 'property owning democracy' aspiration becomes ever less plausible. Politicians and social commentators do talk of solutions to the UK's housing problem. We often hear arguments for giving young would-be owner occupiers a kick-start. And less often, talk of reforming the rental sector - secure tenancies for example, and permission to decorate as people's needs change. Who could argue? It all makes sense.

But the real problem is failure to recognise the long-term consequences for a working population that rents.

What happens to today's Generation Rent when they hit retirement?

The few who managed to get onto the housing ladder will have paid off their mortgages and will be looking forward to low cost living for the rest of their lives. The majority though, will face retirement still paying rent. What happens when they retire on a fraction of their current pay? Minimum contributions to current workplace pension schemes won't bridge the gap. How will Londoners spending sizable proportions of salary on rent, pay the bills from a tiny pension income? It's just not going to be possible. More to the point, who will do this for them? Are we prepared for a sudden hike in tax to pay for additional housing benefit when Generation Rent retires?

Today's politicians need to acknowledge the problem and start to plan. They may well be dead by the time the repercussions hit, but surely they don't want to leave future generations with this time-bomb. And today's journalists need to appreciate the magnitude of the problem in order to hold our politicians to account.